The MIP1 gene which encodes yeast mitochondrial DNA polymerase possesses in its N-terminal region the three motifs (Exo1, Exo2 and Exo3) which characterize the 3'-5' exonucleolytic domain of many DNA polymerases. By site directed mutagenesis we have substituted alanine or glycine residues for conserved aspartate residues in each consensus sequence. Yeast mutants were therefore generated that are capable of replicating mitochondrial DNA (mtDNA) and exhibit a mutator phenotype, as estimated by the several hundred-fold increase in the frequency of spontaneous mitochondrial erythromycin resistant mutants. By overexpressing the mtDNA polymerase from the GAL1 promoter as a major 140 kDa polypeptide, we showed that the wild-type enzyme possesses a mismatch-specific 3'-5' exonuclease activity. This activity was decreased by approximately 500-fold in the mutant D347A; in contrast, the extent of DNA synthesis was only slightly decreased. The wild-type mtDNA polymerase efficiently catalyses elongation of singly-primed M13 DNA to the full-length product. However, the mutant preferentially accumulates low molecular weight products. These data were extended to the two other mutators D171G and D230A. Glycine substitution for the Cys344 residue which is present in the Exo3 site of several polymerases generates a mutant with a slightly higher mtDNA mutation rate and a slightly lower 3'-5' exonucleolytic activity. We conclude that proofreading is an important determinant of accuracy in the replication of yeast mtDNA.